“Benchmark helped our pension plan develop an Investment Policy Statement to establish guidelines for the Plan’s investment portfolio in the areas that most influence the investment returns and Funded Status of the Plan.”
The pension plan is looking to develop a statement which establishes accountability standards that will be used to monitor the progress of the plan’s investment program and to evaluate the contributions of the manager hired on behalf of the Plan and its beneficiaries.
The pension plan sponsors need to fulfill their fiduciary responsibilities to establish a mission statement, investment philosophy, goals and objectives for the plan. Additionally, they need to establish a clear statement on the duties and responsibilities of the Board of Trustees of the pension plan, the staff of the plan sponsor, and the manager hired to execute the management of the investment portfolio of the plan. Pension fund fiduciaries may consider the following items for inclusion in the section of the investment policy that identifies the mission and purpose of the plan and its investment program (or similar section).
Asset allocation is the key determinant of return and, therefore, commitments to asset allocation targets will be maintained through a disciplined rebalancing program.
Diversification, both by and within asset classes, is a primary risk control element.
Passive and active management—active and passive fund portfolios are suitable investment strategies—with passive management especially suitable in highly efficient markets.
Market timing is precluded as an acceptable investment strategy.
Liabilities—the investment program is ultimately for the purpose of meeting the pension system’s obligations for benefit payments.
Cash flow obligations are important for the investment program to be cognizant.
For total plan assets, the goals are as follows:
Working closely with this client, Benchmark was able to create an Investment Policy Statement that not only established a clear indication of the plan sponsor’s objectives, but also clearly defined roles and responsibilities and expected results for the Trustees, staff and external investment managers. The Trustee’s now feel much more comfortable that they are meeting their fiduciary and legal responsibilities to the pension plan and their compliance staff and errors & omissions insurance provider agree.